Here is some added perspective on how monetary policy works. Jedi mind tricks.
When you can make a credible commitment to a policy goal, you don't have to work as hard to hit it; markets will do the work for you. Mr Wright suggests that the Fed could pull a similar trick for a different variable, like long-term interest rates. (The Fed could target an exchange rate, which would almost certainly make for potent stimulus. But it would generate an international uproar and would likely lead to a wave of protectionist retaliation.) If the Fed were to declare its intention to buy bonds until rates hit a specific level, markets would help push the rate toward that level, leaving the Fed with less to do than if it were to keep its policy goal unclear and try to hit the target through brute force.Can the SNB keep up the peg? We are about to find out if the force is strong with this one.
Dessert:
Found out that you can even trade on correlation. Perhaps I have been ignorant.
